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JAISAL NOOR: Welcome to the Real News Network and welcome to the latest addition of the Bill Black Report. Joining from Kansas City, Missouri is Bill Black. He’s an Associate Professor of Economics and Law at the University of Missouri, Kansas City. He’s a white collar criminologist, former financial regulator, author of The Best Way to Rob a Bank is to Own One, and of course he’s a regular contributor to the Real News. Thank you so much for joining us Bill. I believe Wells Fargo has been in the news yet again. Tell us about their latest scandal.

BILL BLACK: Well, their latest scandal is actually another insurance product, but you’re probably asking about the two latest scandals and how it fits into the bigger scandal. And by the way, we’re doing all of this on the 10th anniversary of BNP Paribas crashing to funds as the market for liars loans collapsed. This is the 10th anniversary of the acute phase of the financial crisis and Wells Fargo brings to us one of the aspects that is least talked about and is most necessary to talk about and that is the role of predation.

There’re many fraud schemes that I’ve often talked about that actually cause losses to the bank, but most of the things Wells Fargo did, made super normal profits for the bank at the direct expense of the customer. In other words, and I’m not overstating this, the strategic plan of Wells Fargo was to predate on its customers. People probably have at least a vague memory that the first thing that became infamous in all of this, because of whistleblowers, not because of Wells Fargo and not because of the federal regulators, was that Wells Fargo created these perverse compensation systems and this ‘you must sell this crap product to our customers or we will fire you.’ That was the incentive system for the little people.

Higher up in the food chain, they made hundreds of thousands to millions of dollars through this system of predation, but the little folks made very little. It was mostly keeping your job. So, what they did was invent accounts. That’s what produced the scandal. That’s actually by far the smallest part of the scandal and that part actually didn’t make money for Wells Fargo because when you create fake accounts, it doesn’t bring in real revenue. It in fact produces expenses. The bigger scandal, by far, is if you came into Wells Fargo for any particular product, like you needed a new checking account, all the pressure was to do what in jargon is called cross sell. Which is to say, you’re going to buy six other products before you leave. All right.

These six other products, are where the real money was because you didn’t need those products. They were bad for you. They hurt their customer. That part of the scandal was almost completely ignored by the federal regulatory agencies, by Wells Fargo’s management and by the media. The second shoe that dropped in all of these frauds, was an insurance product. Regular viewers may recall that I’ve talked to a number of times about how in the UK, the United Kingdom, the great scandal in the banking system was predation through the sale of massively overpriced insurance. Now, that’s again the real scandal that people, or the customers are being systematically ripped off by Wells Fargo, being sold horrifically overpriced product that they don’t need, but that of course is not how the media or the federal regulators or Wells Fargo’s management has played it.

They said, “Oh, no, no. It was just a technical problem to about a half million customers where we secretly put this insurance product on, made you responsible for it, but didn’t tell you we were doing it when you got a car loan from us and then …”

JAISAL NOOR: Bill, to give some perspective, thousands of people lost their cars because of this.

BILL BLACK: Right, so you don’t know that you have this stupid insurance policy because you’ve already got your own insurance. Right, and they don’t tell you that they’re doing this. They are charging it, but you don’t know and so you don’t pay and then they say, “Oh, great, we’ll foreclose your car.” That’s how they’re treating the scandal that they foreclosed on your car, which is indeed scandalous, but I mean the first part is, it isn’t just the 500,000 folks where they secretly did this, they shouldn’t be selling this product to anybody. Right? That’s the vastly bigger rip off.

The third one is, yet another insurance product also involving cars. The first one, that I described is collateral asset protection and the media has actually treated this as these are products sold to protect consumers. No, they are sold to rip off the consumer. That is the sole purpose from Wells Fargo’s standpoint and they are immensely successful and it’s way beyond the mere 450,000 people who didn’t know and got into trouble with their cars as a result.

The second insurance scandal, which is the third overall scandal in all of this, is yet another acronym. This is a Guaranteed Asset Protection Gap instead of Cap, but all of them are crap, right? GAP, well it turns out, this is again, treated by the media and the regulators as the scandal is that when you got this insurance and then you sold your car and you no longer needed insurance and Wells Fargo knew you had sold your car, they would still keep charging you the insurance and they wouldn’t refund, which is their obligation, the portion of the insurance that is no longer needed and Wells Fargo discovered shock and horror that their internal controls are terrible. In other words, gosh we meant to do the right thing, but our systems just didn’t tell us. Gosh and again, the real scandal is the far broader than those people who didn’t get refunds, which again numbers in the hundreds of thousands of folks, it’s the millions of folks that bought the product and got ripped off by this outrageously overpriced insurance.

You should never get insurance through your lender on all these things is one of the lessons, but no one should be allowed, the lender shouldn’t be allowed. Everywhere we look, in the United States and the United Kingdom, this is always associated with ripping off the customer and so, it is really, really, time if you’re a Wells Fargo customer, run. Don’t walk and get your money the hell out of Wells Fargo and put it in your local credit union or something that you have confidence in. Stop being ripped off by these people.

JAISAL NOOR: All right Bill. Thank you so much for that troubling and astounding report and I’m sure several viewers will be going to their bank and opening up a new account after watching this. Thanks so much for joining us.

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